Ornge is taking legal action to recover $1.2-million in loans to Chris Mazza, just days after his six-year tenure ended as chief executive officer of the embattled air-ambulance service.

An official close to Ornge confirmed to The Globe and Mail on Sunday that Dr. Mazza received a $500,000 housing loan in 2010, and two additional loans totalling $700,000 in 2011.

"We are taking legal action to ensure we can do everything possible to recover that money," the official said.

Story continues below advertisement

Ornge receives $150-million in annual funding from the Ontario government to co-ordinate all aspects of the province's air-ambulance services. Forensic auditors from the Ministry of Finance are poring over its financial records to determine whether taxpayers' money was used for private gain.

Dr. Mazza received the housing loan from Ornge's publicly-funded operation, the official said. Real estate records show that he purchased a house in August, 2010 for $735,000. The house, located on a tree-lined crescent in Etobicoke, is now up for sale for $1.4-million.

The loans totalling $700,000 were made by one of the private, for-profit companies created by Ornge. Ontario Health Minister Deb Matthews has ordered Ornge's new board of directors to wind down the for-profit companies. The entity that made the loans, Ornge Global GP Inc., is now insolvent.

The loans to Dr. Mazza have been "a real focus" for Ron McKerlie, the interim chief executive officer of Ornge, and the forensic auditors, the official said.

A source close to Dr. Mazza defended the loans, saying they were part of his compensation package, and were in recognition of incentives he had earned over four years. The loans were initiated and approved by the former board of directors, the source said.

Rainer Beltzner, former chairman of Ornge, was "aware" of the loans, acknowledged the official close to Ornge. Mr. Beltzner resigned in late January, when the new board was appointed.

He could not be reached for comment on Sunday. A man who answered the phone at his residence said he was not available.

Story continues below advertisement

Story continues below advertisement

Ornge Global GP was one of the entities Dr. Mazza planned to use to generate revenue by leveraging the publicly funded air-ambulance service into a world-class medical transport business.

These entities were to receive 97 per cent of the revenue, leaving just 3 per cent for the government, according to a copy of a briefing document prepared by Mr. Beltzner. The document, dated Jan. 19, 2011, and addressed to Ms. Matthews, also says Ornge has the unilateral power to establish these ventures, "requiring nothing from the government."

Ornge Global GP declared bankruptcy on Feb. 2. Just one week later, its trustee in bankruptcy filed a financing statement under the Personal Property Security Registration System, to ensure that its $700,000 claim against Dr. Mazza has priority over any other creditors, according to a copy of the document obtained by The Globe and Mail.

The registration system is a public database that shows whether personal property in Ontario has been used to secure a loan or is subject to a lien.

The source close to Dr. Mazza said these actions could prompt other creditors to attempt to collect on their loans.

Story continues below advertisement

"It's all very punitive," he said.

It was the bankruptcy of the private company that gave Ornge the legal authority to terminate Dr. Mazza's employment without severance. He had been on medical leave since December, and remained on the payroll at Ornge Global, earning $1.4-million a year.

Ornge Global GP is one of two entities that declared bankruptcy. Sister company Ornge Global Holdings LP has no assets, bankruptcy documents show. Its largest creditor, another Ornge entity, is owed $5.6-million. It also owes $441,500 to Fasken Martineau, Ornge's legal counsel.

Alfred Apps, the key legal adviser to Ornge, is resigning from Fasken and joining Wildeboer Dellelce, the law firm where his brother, Eric, also practises.

Fasken's future with Ornge, meanwhile, remains uncertain. Ornge is in the process of seeking competitive bids for its legal work.

Karen Howlett is a national reporter based in Toronto. She returned to the newsroom in 2013 after covering Ontario politics at The Globe’s Queen’s Park bureau for seven years. Prior to that, she worked in the paper’s Vancouver bureau and in The Report on Business, where she covered a variety of beats, including financial services and securities regulation. More

We have closed comments on this story for legal reasons. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.